Fintech Is Hot, But The Demise Of Traditional Banking Has Been Greatly Exaggerated

Chris Myers
, ContributorI write about my journey as a first-time CEO and startup founder.Opinions expressed by Forbes Contributors are their own.

It’s no secret that Silicon Valley is always on the lookout for the next big thing. It’s that drive to test, innovate, and explore that keeps the technology sector hurtling forward at breakneck speed.

Fintech (or financial technology) is the new “it” sector--FORBES has compiled a list of the top companies in the growing field. It's near and dear to my heart. When my team and I started BodeTree back in 2010, fintech wasn’t the most popular sector for investors and technology pundits. However, over the past few years, everything has changed. According to Citigroup, approximately $19 billion of incremental investment has flowed into the fintech sector over the last year, up from a mere $1.8 billion in 2011.

The hype is now reaching a fevered pitch. Earlier this week, The New York Times’ Andrew Ross Sorkin published an article about the state of fintech and its relationship with traditional banks. In the article, he argues that some of the more cutting-edge technologies in the market could fall short of their goal of disrupting banking due to acquisitions and partnerships with the very organizations they’re looking to change.

I couldn’t agree more with Sorkin’s assessment. The opportunity in fintech is huge, but banks aren’t going anywhere. In fact, the most successful fintech companies will be the ones that learn how to work with banks, rather than try to supplant them.

Why is fintech so hot right now? I believe it’s because banks are scared. After all, overall public sentiment towards banks continues to be negative post-recession, and not much has changed from a technological perspective over the past twenty years, leaving banks vulnerable to innovators. Citigroup, for example, reports that fintech may be on the cusp of an “Uber moment” that fundamentally changes the industry.

This fear is a powerful motivator, and it is certainly helping fintech companies get their foot in the door of banks. Fear of massive disruption is largely unfounded, but banks are wise to fear the effect of innovators nibbling away at specific elements of their business. This sense of concern and anxiety on behalf of the banks represents an opportunity for incremental innovation in a staid industry.